Managing Human Capital and Entrepreneurship
Table of Contents
2.1 Timmon’s entrepreneurship framework. 5
2.2 Timmon’s model for success. 5
2.3 Entrepreneurship theories. 6
2.3.1 Psychological entrepreneurship theories. 6
2.3.2 Opportunity based theory. 7
2.3.3 Resource-based entrepreneurial theories. 8
1.0 INTRODUCTION
Entrepreneurs are people who recognize opportunities where others see failure, chaos, confusion and contradiction. They are aggressive and they are out to create change in the business industry. Their efforts are remarkable in the revitalization of the global economy. Entrepreneurship is the most powerful economic force ever known to humankind. Through the exploitation of entrepreneurial activities, jobs are created and these act as sustaining sources of income to individuals. There has been a lot of revolution in the entrepreneurial sector since 1990 where by different ways of thinking and planning have come up (Kuratko, 2013).
Great entrepreneurs such as Bill Gates of Microsoft, Michael Dell of Dell computers, Steve Jobs of Apple and Andy Grove of Intel used creativity, took risks, and they were highly innovative, and had a passion for business (Kuratko, 2013). The innovative risks taken by these business tycoons has contributed to economic development far greater than anyone can imagine. The 21st Century has witnessed rapid technological breakthroughs that have led to the advent of social media platforms that include the invention of Google, Twitter, Facebook, Amazon and LinkedIn. These challenges can all be addressed by the adoption of the concept of entrepreneurial determination (Kuratko, 2013).
Successful entrepreneurship requires more than money and luck; it entails risk taking, creativity and planning. Before anyone thinks of starting a business, he or she must consider issues that entail; the kind of business they want to start, where it should be located, the availability of targeted customers, how much capital and labor is required (Kuratko, 2013). Uncertainty clouds the pre-entry phase of any business; however, entrepreneurs must take a risk and venture in unfamiliar territories. They are not aware of what is likely to happen but they go ahead and start the new business. Creativity in the entrepreneurship field is required because it brings the difference in similar businesses hence a competitive advantage. Proper planning is required in order to avoid misuse of resources (Kuratko, 2013). This paper will look into various theories about entrepreneurship, compare, and contrast them with Timmon’s entrepreneurship framework
2.0 LITERATURE REVIEW
2.1 Timmon’s entrepreneurship framework
According to Timmons, three components determine the success of a new business venture; these include the opportunity, the entrepreneur or the management team and the resources needed to start a business. Once the opportunity is captured, market gaps diminish. However, discovery alone is not enough for entrepreneurship (Zacharakis et al, 2007). The process of opportunity identification, evaluation and exploitation must be balanced by resource acquisition and team development. The creation of a new business is not an event but an evolutionary process. It is a systematic process. The role of the entrepreneur and the team is to juggle all of these key elements in an ever-changing environment. Organizing these activities is crucial for the success of a new business (Zacharakis et al, 2007).
Source: Entrepreneurship: The engine of growth by Minniti (2007)
According to Zacharakis e Opportunity denotes the favorable occasion or a chance that the entrepreneur identifies and therefore wants to grab or exploit. The entrepreneur is the owner of the business and he is the one who manages every resource and plans for the activities of the venture. Resources are necessary to ensure a smooth running of the business because they are the main determinants of business success. The resources can be in terms of finances, social networks or the human resource (Zacharakis et al, 2007).
2.2 Timmon’s model for success
Timmon further elaborates his framework in terms of a model whereby the primary forces include the founder of the new venture and the entrepreneurial team, recognition of the opportunity and the resources needed to start the business. Thus, the venture is in a position to succeed commercially. Entrepreneurs create from scratch or they seek for opportunities and know how to exploit them. If they do not have the necessary skills, they create a team that is competent enough. Therefore, this model is based on teamwork to ensure success. The founder of the venture should employ leadership skills, take the risk and be creative. He should therefore come up with a business plan considering the available resources and opportunities. He should be aware of the available gaps and market imperfections to fill them. These gaps should also help him critically analyze the opportunity.
2.3 Entrepreneurship theories
These remain important to the development of the entrepreneurship field accompanied by intensive research.
2.3.1 Psychological entrepreneurship theories
These emphasize on the personal characteristics that define an entrepreneur based on the personality traits of the founder and the locus of control in which he operates. According to Coon 2004, personality traits refers to the stable characteristics exhibited by an individual in in most situations. These qualities are enduring and inborn or potentials that make a person an entrepreneur. Some of these traits associated with entrepreneurs include; entrepreneurs are opportunity driven meaning that they are always on the lookout searching for opportunities to exploit; they show a wide range of business acumen and knowledge. They are highly optimistic meaning that they always have hopes and do not fear to fail. The founders are also hard workers and they exhibit perseverance. Their driving motive is the desire to compete and win, they are always dissatisfied with status quo that is to say, they believe in change, they are lifelong learners such that they desire to learn always, to them failure are spring boards to move to another level, they believe they can personally make a difference(Moher et al, 2007).
Locus of control relates to the individual’s outlook on the main causes of the events that occur in his or her life. Beliefs on whether the outcomes of our actions are dependent on what we do represents the internal control orientation or on events outside our personal control which is referred to as the external control orientation (Anderson & Miller, 2003). Here, the entrepreneur’s success comes from his or her abilities and support from outside. Individuals with an internal locus of control believe they can control events in life while those with an external locus of control believe that life events are because of chance, luck or fate. Entrepreneurs need to have an internal locus of control because they are in charge of the business to be able to control any likely challenge or occurrence (Coon, 2004).
Moher et al, (2007) notes that risk taking and innovativeness are the driving forces towards the need for achievement. One has to be tolerant to ambiguity to make a good entrepreneur. Recent findings on risk taking strengthen earlier empirical studies that indicate that aversion to risk declines as wealth rises (Moher et al, 2007). This means that as the business continues to grow the entrepreneur does not fear to take risk. No one begins a business with a view to fail but rather make profits. This theory therefore emphasizes that an entrepreneur has to possess certain traits to ensure the success of a new business. It also puts it clearly that one should be able to control any occurrence that strikes the business and that the most successful entrepreneur is the one that has the desire to achieve (Moher et al, 2007).
2.3.2 Opportunity based theory
An opportunity-based approach provides a wide range ranging conceptual framework for entrepreneurship research (Fiet, 2002). Entrepreneurs do not cause change but exploit the opportunity that change in technological, consumer preferences, creates. The entrepreneur always searches for change, responds to it, and exploits an opportunity. Therefore according to this theory, as long as there is an opportunity and that one ones to exploit it, the business should success regardless of their resources. The innovations witnessed at Apple Computers that has birthed Apple brand of iPhones is a good example of a scenario in which the company has exploited the opportunity presented by the markets (Fiet, 2002).
2.3.3 Resource-based entrepreneurial theories
These theories argue that the founders’ access to resources is a crucial predictor of a new venture growth. This is because one will use the resources to exploit the available opportunity. The access to resources improves the founder’s capacity to detect and act upon discovered opportunities. Resources act as an empowerment tool whereby the entrepreneur can venture into any opportunity as long as they have the required resources (Davidson&Honing, 2003). For instance, Apple Company was able to venture into the iPhones business because they had technological and financial resources.
Financial capital
Empirical research has revealed that the beginning of new firms is common when founders have access to financial capital. Entrepreneurs with adequate financial capital can acquire resources to needed to exploit entrepreneurship opportunities (Clausen, 2006). Other studies show that most entrepreneurs establish new businesses with limited capital and that financial capital is unrelated to their probability of becoming successful in their ventures (Hurst & Lusardi, 2004). Individuals can use other resources to recognize new opportunities for a new fire e.g. better access to information and knowledge (Anderson & Miller, 2003).
According to Clausen 2006, the social networks that entrepreneurs have constitute a considerable part of their opportunity structure. An individual may have ability to recognize that a given opportunity exists but may lack the social connections to transform the opportunity into a business startup (Shane & Erkhardt, 2003). Literature available on this theory indicates that a strong tie to resource suppliers is integral to the process of resource acquisition and opportunity exploitation (Gartner et al, 2004).
3.0 CRITICAL ANALYSIS
Timmons model of entrepreneurship varies markedly from the traditional models of entrepreneurship. In this model, Timmons emphasizes on three factors that are instrumental in all business start-ups. These include opportunity, entrepreneur, and resources. Unlike the conventional models that begin with a business plan, while Timmons model begins with market analysis. The business plan and financing are delegated to second position. According to this model, a well thought out marketing strategy will contribute in the creation of a fail-proof business plan, which will readily get funding from potential investors.
Timmons emphasizes on opportunity, the entrepreneur and the resources needed for the success of a new business. These factors are also mentioned and emphasized in the three theories i.e. the psychologicaltheory, whichhighlights the various personal traits that the entrepreneur should possess; the opportunity theory, which mentions on how available resources can be exploited; and the resource based theory that highlights the required resources that ensure success of a new business. The major difference is that Timmon’s combines the three theories to make up his framework but the theories emphasize on a single component.
The advantage of Timmon’s framework is that it is comprehensive and it focuses on the business as a whole. His framework represent the four factors of production namely; land, labor, entrepreneurship and capital. Land can be a source of opportunity where a business can establish its premises, labor and capital represent the resources required while the entrepreneurship provides the owner of the business as well as the management.
In my own view, I support Timmon’s entrepreneurial framework for it focuses on the entire business process. The most important factor to consider the business to succeed is the available market and out of the opportunity component, market is a key consideration (Gatner et al, 2004). His framework provides all the factors needed to ensure a competitive advantage for the business thus a larger market share. The entrepreneur’s access to capital is an important prediction to the growth of a new business (Clausen, 2006). Therefore, entrepreneurs should consider Timmon’s framework to ensure that that their businesses thrive.
4.0 CONCLUSION
From the discourse above, it is clearly seen that entrepreneurship is an important determinant of entrepreneurial success. Entrepreneurship presents a picture of entrepreneurs as risk-takers and highly innovative. Their main tasks are to manage resources, put people together and equip them with physical capital and ideas to produce product or process innovations. From the analysis by Timmon, it is evident that for a business to thrive there must be an opportunity, the entrepreneur and the resources needed to exploit the opportunity. The resources available should be well managed and that is why the psychological theory brings out the necessary personal traits an entrepreneur should have to help him manage the available resources appropriately. There is need for the entrepreneur to relate well with other people to ensure that his social networks are active. This is seen from the social capital theory, which emphasizes on social networks. The social network ensures that they are well informed on opportunities and can be an advertising base hence ensuring a larger market share for the business.
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